It is a warm December evening and more than 30 clients are waiting in line at Hair Art & Barber Salon, along Nairobi’s Kimathi Street.
Paula Rosita, a 34-year-old office administrator in a Nairobi company, is one of those in the salon having her hair done. She spends $61 to treat her hair, for pedicure and manicure every month.
“I can’t help it because I need to look good all the time. It’s a must in my profession,” she said.
Rex Kimani, a hair specialist at the salon, serves more than 50 clients a day, with the numbers increasing during the holiday season.
“It is just like a restaurant where people have to go every day and eat. Women need to look good all the time,” explained Mr Kimani.
Some of the products Mr Kimani uses include L’Oreal’s Dark and Lovely and Interconsumer Products owned Nice and Lovely and Haco’s TCB.
Rosita is part of emerging middle class — that the African Development Bank estimates to be about seven million in Kenya and 15 million in East Africa — who have spare income to spend on foreign brands for facial make up, hair care and even sunscreen.
These are the consumers that L’Oreal, one of the largest cosmetics company in the world, had in mind when it commissioned its production facilities in Kenya two weeks ago.
L’Oréal has been operating in South Africa since 1963, and its presence in the Africa, Middle East zone now comprises nine subsidiaries, a hair and skin care products plant in Midrand, and a research and innovation testing centre in Johannesburg.
Its products have been widely available in the market, either through distributors or consumers importing for their own consumption, but the decision to open up a factory in Kenya to serve the wider East African market, and in Nigeria for the West African market reflects a realisation among the global cosmetic industry that black beauty in Africa is the next big thing as growth in the developed markets mature. The manufacturing plant in Kenya will act as a regional hub to serve Uganda, Tanzania, Rwanda, Burundi and Ethiopia.
This is a realisation that hit L’Oreal in 2000, when it acquired SoftSheenCarson, a leading manufacturer of products targeting African American women such as the popular Soft n Sheen and Dark and Lovely, but whose entry to the sub-Saharan market had not been a major priority. This opened opportunities for imitator brands such as Unilever’s Fair & Lovely and Interconsumer’s “Nice & Lovely”.
Since the year 2000, Africa’s population has expanded by 200 million people to cross the one billion mark this year — a population that is also very young with a median age of 19.7 years, compared to 32 for Brazil, Russia, India and China.
“Overall, out of 100 Nigerians, 55 are under 20 years-old,” wrote Simon Freemantle a research analyst at Standard Bank of South Africa in a note to clients. In East Africa, the population of under 20 year-olds is nearly 80 per cent. It is also estimated that 150 million Africans have entered the middleclass since 1990, and 15 million more will do so by 2015.
As the regional economies grow, consumers, especially black African women, have a great tradition of spending a lot of time taking care of their beauty and braiding imaginative hairstyles.
According to L’Oreal, the three major markets are hair care, particularly straightening and relaxing products (nearly half of women say they use these products once a month) in addition to body care and deodorants.
“In terms of other personal care products, African women favour moisturisers for the body and concealers for their complexion,” said Patricia Ithau, CEO, L’Oreal East Africa.
“The Group’s broad portfolio of brands puts it in a position to meet all these aspirations. In particular, L’Oréal can draw on a long history of expertise in ethnic hair and African skin thanks to its specialist research centre in Chicago.”
As the economics of helping African women look good is starting to work, and global brands like L’Oreal, Proctor and Gamble, Avon, Biersdorf and Estee Lauder are starting to develop a crush on Africa, soon, Africa could translate into a market with a potential customer base across a wide spectrum of product categories in the region of 500 to 700 million people. This is more than double the US population, and near the size of all of Europe.
Big firms lead
At the turn of the century, the big global firms almost never cared about spending on research to develop high value products for the black skin. The major firms that played in the African market were the likes of Unilever, which continues to sell popular low-priced products in Kenya.
“Unilever Kenya Ltd continues to lead sales and accounted for a 10 per cent value share in 2010,” says a market research report from Euromonitor.
“This company benefits from offering a range of strong brands, including Vaseline Intensive Care, Lady Gay, Fair & Lovely and Dove. Lady Gay benefited from being an affordable, trusted brand in general purpose body care, and as consumers sought to save money by spending less on skin care, benefited from being seen as reliable and of good value.”
According to Euromonitor, Unilever Kenya Ltd, Beiersdorf East Africa Ltd and PZ Cussons East Africa Ltd continued to lead the market due to their network in terms of distribution and the brand names of their many products in the Kenyan market. While Unilever leads with low-priced products for the masses, Beiersdorf has been the biggest entrant into the regional market. Today, it spends heavily on advertising to promote its up market brand, Nivea.
L’Oreal is entering a crowded field even in categories where it has competitive products. According to Euromonitor, the hair care is highly fragmented, with no player accounting for a value share of more than 4 per cent market share in 2010. The leading players include Revlon SA (Pty) Ltd with a 12 per cent value share, Sara Lee Household & Body Care Kenya with a 4 per cent value share and SoftSheen-Carson, Haco Industries Kenya Ltd andInterconsumer Products Kenya, each with value shares of three per cent in 2010.
Rising inflation has also led to a shift in consumer patterns.
“A growing number of consumers are opting to style their hair at home, rather than opting for salon treatments,” says the report.
“This boosted sales for a number of product areas, with colourants, perms and relaxants and salon hair care all seeing the strongest current value growth in 2010 over the previous year, as a result of this trend. Colourants and perms and relaxants benefited from consumers getting together to style and colour each other’s hair in order to save money, rather than visiting salons.”
L’Oreal has been distributing its products in Kenya through traders. The company manufactures brands such as SoftSheen-Carson, Dark and Lovely and Blue Ice Deodorant.
These are products largely seen as targeting the middle-to-high income earners because of their pricing and distribution channels.
But L’Oreal says its products are still not out of reach for the low-income earners, who can still spend on them when they have cash.
“You find that low income consumers are prepared to treat themselves to high quality products when they have a bit of money,” said Ms Ithau.
It is not only L’Oreal taking this bet on quality products at a higher price to grow their revenues and market share in the middle and high income bracket. Other players such as Interconsumer Products, Beiersdorf (BDF) East Africa, Haco Tiger Brands, Unilever Kenya, Beiersdorf and PZ Cussons are doing the same. However, for the middle class with money, experts say colourants, perms and relaxants and salon hair care products are their choice. Kenya’s regional company, Interconsumer Products Ltd, built from scratch by Paul Kinuthia, says it has also cast its eyes on the upper class.
“In two years, we shall launch a brand for the upper class only as we repackage the Nice & Lovely brand to improve quality,” said John Mwangi, the firm’s promotions and events manager.
Interconsumer found its niche targeting the lower and middle-income earners by pricing its products cheaper compared to foreign brands. The firm also introduced smaller packets, which allowed low-income earners to buy lotions for as little as 11 US Cents for 10 grams of facial creams and body lotions.
Beiersdorf (BDF) East Africa, makers of brands such as Nivea, has been aggressively advertising in niche markets. Last year, Beiersdorf, through its Nivea Brand, sponsored one of Kenya’s leading rugby teams Harlequins. The sponsorship was worth Ksh3 million ($33,000) in brands and advertising in the local press.
The company targeted the middle and upper income class of males, who traditionally follow the game. The advertising was aimed at increasing the awareness of skin care lotions among men. For Nivea, the intention was to use the sponsorship to create more awareness. BDF earmarked over $5.2 million in 2011 to be used in upgrading its East Africa factory to improve warehousing facilities and reach the growing middle class. This is part of the company’s $1.3 billion global marketing budget set aside for Nivea in 2011.
BDF East Africa managing director Mathieu Levasseur said the May launch of Nivea’s Hydra IQ lotions has given the company a double-digit growth in six months. Nivea has a leading 17 per cent share in Kenya’s body lotion market.
“The growth since the launch is better than expected. It shows around 20 to 25 per cent growth compared with last year,” he said.